Correlation Between Equity Growth and Short Term
Can any of the company-specific risk be diversified away by investing in both Equity Growth and Short Term at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Equity Growth and Short Term into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Growth Fund and Short Term Government Fund, you can compare the effects of market volatilities on Equity Growth and Short Term and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Equity Growth with a short position of Short Term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Growth and Short Term.
Diversification Opportunities for Equity Growth and Short Term
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Equity and Short is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Equity Growth Fund and Short Term Government Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Government and Equity Growth is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Equity Growth Fund are associated (or correlated) with Short Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Government has no effect on the direction of Equity Growth i.e., Equity Growth and Short Term go up and down completely randomly.
Pair Corralation between Equity Growth and Short Term
Assuming the 90 days horizon Equity Growth Fund is expected to generate 7.22 times more return on investment than Short Term. However, Equity Growth is 7.22 times more volatile than Short Term Government Fund. It trades about 0.26 of its potential returns per unit of risk. Short Term Government Fund is currently generating about 0.07 per unit of risk. If you would invest 3,366 in Equity Growth Fund on September 19, 2024 and sell it today you would earn a total of 98.00 from holding Equity Growth Fund or generate 2.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Growth Fund vs. Short Term Government Fund
Performance |
| Timeline |
| Equity Growth |
| Short Term Government |
Equity Growth and Short Term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Growth and Short Term
The main advantage of trading using opposite Equity Growth and Short Term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Growth position performs unexpectedly, Short Term can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Short Term will offset losses from the drop in Short Term's long position.| Equity Growth vs. Qs Moderate Growth | Equity Growth vs. Strategic Allocation Moderate | Equity Growth vs. Jpmorgan Smartretirement 2035 | Equity Growth vs. Pro Blend Moderate Term |
| Short Term vs. Mid Cap Value | Short Term vs. Equity Growth Fund | Short Term vs. Income Growth Fund | Short Term vs. Diversified Bond Fund |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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